Patients as Consumers - Harvard Law School

MLR 106-4 Edit Format Document Hall Mich L Rev.doc
Before widespread health insurance, doctors displayed their
impressive market power in a notable way—they adjusted charges to fit
patients’ income, so some patients paid as much as three to five times
more than others. In 1931, one doctor’s median fee for treating acute
diabetes was $402, but his fees ranged almost fivefold, from $232 to
$1052; X-ray treatments for severe acne could cost from $70 to $210. 78
For a major operation, surgeons often charged patients one month’s
salary. 79
These imposing variations in price demonstrate doctors’ market
power and the complexity of their motives in setting fees. Were
maximizing income their only goal, doctors would accept only patients
who could pay the marginal costs of their services. Instead,
nineteenth-century physicians apparently charged the rich more so they
could charge the poor less. 80 We say “apparently” because sliding fees
might help doctors charge everybody maximally rather than subsidize
care for the poor. 81 And indeed, by the 1930s, sliding fees were
denounced as “a device for raising fees above the standard [rates]
. . . rather than for lowering them for the poor, their major
historical justification.” 82
78. Michael M. Davis, Paying Your Sickness Bills 142–43(1931).
79. Houda v. McDonald, 294 P. 249, 251 (Wash. 1930); see also Max
Seham, Who Pays for the Doctor?, New Republic, July 9, 1956, at 11.
80. See David Rosner, Health Care for the “Truly Needy”: Nineteenth-
Century Origins of the Concept, 60 Milbank Memorial Fund Q. Health & Soc’y
355 (1982); Ruffin & Leigh, supra note 47. A price-competitive market would
prevent this cross-subsidy because wealthier patients would seek out cheaper
doctors. Indeed, some wealthy patients did just that at the turn of the
century. Dressing in tattered clothes, they would present themselves as
indigent patients. Frederick Holme Wiggin, The Abuse of Medical Charity, Med.
News, Oct. 23, 1897, at 521. This was widely viewed as a blatant “abuse of
charity” because it threatened the “Robin Hood” social compact that allowed
doctors to charge the wealthy somewhat more in order to help provide care to
the poor. Gert H. Brieger, The Use And Abuse of Medical Charities In Late
Nineteenth Century America, 67 Am. J. Pub. Health 264 (1977).
81. E.g., Kessel, supra note 47.
82. Herman Miles Somers & Anne Ramsay Somers, Doctors, Patients, and
Health Insurance 54 (1961). Former Yale law professor Walton Hamilton
explained:
“[C]harity work” and “the sliding scale” came into existence
together; they are complementary aspects of the single
institution of the collective provision of the physician’s
income; . . . [but] in our modern world the sliding-scale is an
instrument easily capable of abuse. Above all, it is significant
that the connection between the two has been broken, and that the
older justifications are no longer relevant.
Comm. on Costs of Med. Care, Medical Care for the American People 191 (1932).
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